Starting your own small business is a big achievement. Despite growing support for the role small companies play in the economy, the first few weeks and months can be a big challenge as you establish yourself.

Many small firms make it through this initial period, but sadly close after just two or three years as they attempt to grow. Moving from one or two people to a larger team comes with a number of challenges that require thought, planning and strategic decisions. It’s a process I’m very familiar with as I’m currently scaling up my own business.

Challenge 1: Strategy

Whether you provide products or services, starting a small business can happen quickly. Whether you’re committing yourself full-time or aiming to build from a hobby, it can be as simple as registering as a sole trader.

But as your company and ambitions grow it can be tempting to quickly expand what you sell to try and secure every possible client that can come your way.

That can lead to two major problems. The first is that as your offering expands, you lose the focus and clarity of what makes your business special. And the second is that not every customer or client is desirable or profitable – by attempting to expand to fill every possible need you can find yourself rushing into areas which actually lose money.

This is why a business strategy and plan is so important and why it should be revisited regularly. The ideal is something which can be summed up on the back of a napkin, and in full should be contained in two or three pages which can be shared with your larger team or potential investors as required.

The importance of the strategy isn’t just as a guide to what to do, but also as a way to decide what you shouldn’t be doing.

Challenge 2: Finances

As a small business it’s advisable to spend time properly planning budgets, cash flow and future growth, but you can often manage to survive even when there are elements missing.

That’s not the case as you scale up. Employees and infrastructure require investment which needs to be covered when times are tough as well as when things are going well. Expand too quickly during a boom time and you can soon find the economic conditions have changed and you’re trapped into fixed costs which can’t be reduced quickly.

It’s important to have good financial advice either internally from a Chief Financial Officer, or externally via accountants who ideally have experience in your type of business.

Working with financial experts means you can ensure you understand all the implications of any financial commitment, and work through financial plans which can cover various situations. If you can plan financially for the worst case, moderate growth, and success, and keep the three in mind, then you can ensure you don’t get caught up in the enthusiasm to expand too quickly.

Challenge 3:  Internal Structures and Employees

As a small business, everyone is likely to be involved hands-on in all aspects of the business. And it’s relatively easy to know what’s going on when your firm is close together in a small office.

As your company grows it requires conscious decisions about the roles required, and what you should be doing as a boss. Which areas should you focus on, and which should be assigned or delegated elsewhere?  Where are you spending your time, and is it the most effective way to use it?

You’ll need to be honest about your strengths, and those of your colleagues and new employees. There are examples of successful businesses with founders who moved from being hands-on to overseeing the entire company, and other thriving companies in which the founder may stay on the factory floor and bring in expertise to focus on management. But in all cases it involves clarity for roles, responsibilities and direction for it to work.

One solution is to outsource business functions, which is aided by a big growth in cloud-based services and tools. We have a core team employed full-time, and a larger network of specialists who can be brought in on specific projects, managed via online project management and collaboration tools.

This is an attractive idea for many small businesses, but it brings an even greater requirement for clear communication and effective planning and scheduling.

Challenge 4: Physical Infrastructure

Traditionally businesses of all types have needed a certain level of physical infrastructure. Retail required a showroom and somewhere for stock, whilst services-based industries needed meeting rooms for clients.

Increasingly those costs can be reduced significantly. An eCommerce business doesn’t need a showroom to be able to sell online, and it’s becoming easier to rent meeting rooms and other co-working facilities across the country.

Do you need an office? Or is it possible to manage your business from home and save the cost of renting (not forgetting to account for increased heating, electricity and insurance costs!). In our case, 95% of our team work from home around the globe, and meetings are held at client offices.

Despite working in digital, our IT costs are minimal as we’ve invested in cloud-based solutions for areas including hosting websites, and the project management and collaboration previously mentioned. By using virtual private servers, our data is as secure as it would be on a hard drive in the office, but can be accessed as required around the globe using any suitable device.

The same approach can work for physical products by using techniques such as drop-shipping to avoid upfront investment in inventory, and to allow a company to gauge demand before filling up a stock room.

Challenge 5:  Feedback

When you deal directly with customers and clients as a small business it’s easy to stay on top of feedback. And in a small business it’s also easy to get direct responses from your team.

But as you scale and become removed from the frontline it can be harder to get a picture of what is going on.

Many successful founders have written about their failures in growing previous companies. Their first attempts often failed as they began to scale and lost cohesion. New hires and employees didn’t necessarily feel part of the core brand values and strategy, and also didn’t have the right ways to share feedback on what wasn’t working. One famous example is Zappos, whose company culture is shared in books, talks and seminars due to the experience and work of CEO Tony Hsieh.

Tools also exist to ensure customer feedback is captured and translates into action where suitable. The rise of social networks means your customers can be recommending or criticising your company to family, friends and complete strangers, whilst more specific customer support tools can help to filter which problems need to be escalated and which can be quickly solved by changing processes or information.

Combining personal insight with data across the business means you’ll be able to judge the right level of response accurately, and see whether you can minimise the same problems in the future.

This is a guest post by Dan Thornton. Dan is an experienced writer, blogger and digital marketer. He’s worked with the UK’s largest magazine publisher, national radio stations, and consults everyone from small start-ups to global businesses, as well as running his own small network of videogames sites.

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